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ELB GROUP LIMITED - Unaudited Group Interim Report for the six months ended 31 December 2018

Release Date: 05/04/2019 17:15
Code(s): ELR     PDF:  
 
Wrap Text
Unaudited Group Interim Report for the six months ended 31 December 2018

ELB GROUP LIMITED                                                                            
Incorporated in the Republic of South Africa                                                 
Registration number: 1930/002553/06                                                          
Share code: ELR      ISIN: ZAE000035101    
('ELB', 'the Company' or 'the Group')
 
UNAUDITED GROUP INTERIM REPORT
for the six months ended 31 December 2018

-   Results significantly impacted by losses incurred on the Gamsberg Zinc project
-   Overall reduction in trading levels across the Group
-   Sales decreased to R1 598 million from R1 715 million
-   Profit for the period decreased to a loss of R271 million from a profit of R52 million
-   Headline earnings per share decreased to a loss of 817 cents from a profit of 158 cents
-   Net asset value per share decreased to 890 cents at 31 December 2018 from
    2 754 cents at 30 June 2018
 
COMMENTARY

INTRODUCTION
ELB is an internationally recognised know-how solutions
provider and capital equipment supplier in the fields of
materials handling, mineral separation, industrial projects,
power solutions and Industry 4.0. This is achieved
through ELB generated innovation, in-house capability
and the supply of world-class equipment and technology.
The Group operates predominantly in Africa and
Australasia.

The results for the period have been dominated, and
severely impacted, by the losses incurred on the
Gamsberg Zinc project in the Northern Cape, currently
being commissioned by ELB Engineering Services
("Engineering Services"). These losses arose subsequent
to the issue of the audited Group consolidated financial
statements for the year ended 30 June 2018. Whilst the
plant is operating, delays in the final performance testing
have resulted in additional costs being incurred in order
to complete the project and hence a delay in receiving
the final milestone payments.

In addition, the Group has incurred additional costs as a
result of remedial work required to bring the tendered and
implemented design of the plant up to the contracted
specifications. These additional costs were expected to
be recovered during the current financial period, however
delays in recovering these additional costs have
necessitated the reversal of some of the expected
recoveries, until such time as the Group is certain that the
additional costs can be recovered.

The Group continues to vigorously pursue all possible
recoveries, which include insurance claims, back-charges,
project asset sales, project scope reduction and
additional plant performance claims.
 
The Group continues on its strategy to further increase
its know-how and technology focused solutions by
pursuing exponential technology-focused opportunities
and partnerships. These include the development and
incorporation of new technologies into the Group such
as the Internet of Things, Artificial Intelligence and other
disruptive technologies. This will further allow the Group
to provide a broader service offering to its existing and
future clients.

FINANCIAL RESULTS
Due to the project nature of the Engineering Services
segment of the Group there is no consistent correlation
between sales and profits in reporting periods.

Sales for the period declined to R1 598 million in 2018
from R1 715 million in 2017. The decrease has mainly
been in the Engineering Services segment due to the
stage of completion on major projects, including
Gamsberg Zinc, but there was also a marginal decrease in
sales in the Equipment segment, with only Australasia
reporting an increase in sales for the period.

Profit before tax for the period decreased to a loss of
R218 million in 2018 from a profit of R80 million in 2017.

Profit for the period attributable to ELB shareholders
decreased to a loss of R231 million in 2018 from a profit
of R45 million in 2017.

Total comprehensive income for the period attributable to
ELB shareholders decreased to a loss of R231 million in
2018 from a profit of R38 million in 2017, after taking into
account the translation of the Group's foreign operations
and other comprehensive income remeasurements.

The adoption of a new International Financial Reporting
Standard ("IFRS"), which became effective in the current
period, has resulted in changes to accounting policies and
disclosures. The adoption of IFRS 15: Revenue from
Contracts with Customers, has had a considerable
negative impact on the financial position of the Group in the
current period, which has resulted in the reduction of
opening retained equity of R333 million, in terms of the
transitional adjustments as required by IFRS 15.

Headline earnings per share for the period decreased to a loss
of 817 cents from headline earnings of 158 cents in 2017.

The net asset value per share decreased to 890 cents at
31 December 2018 from 2 754 cents at 30 June 2018.

OPERATIONS

Equipment
Sales decreased to R463 million in 2018 from R486 million in
2017 and profit before tax decreased to R36 million in 2018
from R47 million in 2017. The market remains in a state of
uncertainty with directly related demand for construction
equipment in a declining trend while demand for
earthmoving and mining equipment and related sectors are
relatively good considering the current economic conditions.
Reasonable demand from existing mining operations
continues to be experienced compared to very low or non-
existent demand from new or expanding mining operations.

The decrease in profit before tax is due to the
aforementioned decrease in sales offset by the impact of a
slight improvement in margins in the current period. The
comparative period included the positive impact of the
strengthening rand in that period compared to the current
period where this impact has been negligible.

Engineering Services
Sales decreased to R848 million in 2018 from 
R974 million in 2017. The decrease is primarily due to the delay
in achieving performance certification on the Gamsberg
Zinc project and the consequent delay in invoicing. Profit
before tax decreased significantly to a loss before tax of
R265 million in 2018 from a profit before tax of R24 million
in 2017, primarily as a result of the issues on the
Gamsberg Zinc project as detailed above. The loss has
been reduced by the positive contribution of the other
projects in the business, which are all on track, in terms of
budget and schedule. In addition, due to its knowledge
and technical capability, Engineering Services has been
awarded a number of operational and maintenance
projects at Medupi in conjunction with the completion of
existing packages of work. Within the next few months
this segment should also see the award of a significant
overland conveyor project, along with the securing of a
number of new projects currently in the pipeline.

Both B&W and the construction business in the segment have
made valuable and positive contributions to these results.

Australasia
Sales increased to R287 million in 2018 from R256 million
in 2017, while profit before tax decreased marginally to
R15 million in 2018 from R16 million in 2017.
Notwithstanding the impact of a marginally lower average
exchange rate on the translation of the Australasia results,
this segment continues to report strong revenue growth
and profitability.

CASH FLOW AND GOING CONCERN

The Group had a net cash outflow from operating
activities of R108 million compared to a net cash outflow
from operating activities of R48 million in the prior period,
with a decrease in net cash and cash equivalents to 
R194 million from R318 million at the prior year end. Of the net
cash on hand at 31 December 2018, R90 million is ceded
and pledged to a local bank to cover trading facilities,
R69 million is offshore with ELB subsidiaries and a further
amount is cash received in advance on projects which is
committed to fund initial project outlays. The net cash
outflow and decrease in cash for the period is primarily as
a result of the increased working capital commitments on
the Gamsberg Zinc project.

The delay in the final performance testing on the
Gamsberg Zinc project has negatively impacted the
timing of the cashflows relating to this project and as a
result the Engineering Services segment has been placed
under severe working capital constraints. It is expected
that only on final commissioning of the Gamsberg Zinc
project will the resultant cashflow assist in clearing a
significant element of these working capital constraints.

The negative impact on Group cashflow of the Gamsberg
Zinc project is being addressed, with the Group working
closely with the project client, its bankers, insurers, other
financial institutions, suppliers and customers to resolve
the cashflow constraints as soon as possible.

The ELB Board believes that the Group will remain a
going concern, based on: an undertaking in the process
of being finalised with the Gamsberg Zinc project client,
which will result in the settlement of the Gamsberg Zinc
project creditors; the successful restructuring of
components of the Group; additional financing facilities
currently being negotiated with the Group's lenders, all
still to be concluded and current banking facilities.

PROSPECTS

The Group is addressing the issues on the Gamsberg Zinc
project which will be resolved in due course and it
continues to pursue the completion and handover of this
project as soon as possible.

The Group continues to pursue identified opportunities and
to deliver on its strategy.

On behalf of the Board

Dr Stephen Meijers
Chief Executive Officer
ELB Group and ELB Engineering Services

Peter Blunden
Chief Executive Officer
ELB Equipment

Michael Easter
Group Financial Director
ELB Group

Boksburg
5 April 2019

GROUP BALANCE SHEET

                                                                               Unaudited     Unaudited       Audited   
                                                                               31 Dec 18     31 Dec 17     30 Jun 18   
                                                                                  R' 000        R' 000        R' 000   
ASSETS                                                                                                                 
Non-current assets                                                               351 414       345 810       346 761   
Property, plant and equipment                                                    184 749       166 282       181 555   
Goodwill and intangible assets                                                    15 358        17 931        16 644   
Pension fund employer surplus account                                             39 650        40 515        39 650   
Deferred tax assets                                                              111 657       121 082       108 912   

Current assets                                                                 1 428 754     1 681 492     2 079 691   

Contract work not yet billed                                                     137 635       342 861       667 806   
Inventories                                                                      833 388       594 386       727 830   
Receivables and other current assets                                             195 969       354 354       349 514   
Cash and cash equivalents                                                        261 762       389 891       334 541   

Total assets                                                                   1 780 168     2 027 302     2 426 452   

EQUITY AND LIABILITIES                                                                                                 
Equity attributable to ordinary shareholders of the Company                      252 743       736 680       780 165   
Issued capital                                                                   109 178       109 479       109 178   
Treasury shares                                                                 (74 531)      (51 115)      (74 587)   
Reserves                                                                          64 691        60 206        64 152   
Retained earnings                                                                153 405       618 110       681 422   

Non-controlling interests                                                          7 856        90 112        98 301   
Total equity                                                                     260 599       826 792       878 466   

Non-current liabilities                                                           40 807        38 664        37 807   
Interest bearing borrowings                                                       25 409        24 237        22 554   
Deferred tax liabilities                                                          15 398        14 427        15 253   

Current liabilities                                                            1 478 762     1 161 846     1 510 179   
Contract liabilities                                                             218 638       162 552       176 404   
Interest-bearing borrowings                                                       96 870       111 348       108 407   
Payables and other current liabilities                                         1 095 062       861 170     1 208 956   
Bank overdraft                                                                    68 192        26 776        16 412   

Total liabilities                                                              1 519 569     1 200 510     1 547 986   
Total equity and liabilities                                                   1 780 168     2 027 302     2 426 452   

Net asset value per ordinary share (cents)                                           890         2 613         2 754   


GROUP STATEMENT OF COMPREHENSIVE INCOME

                                                                               Unaudited     Unaudited       Audited   
                                                                              Six months    Six months          Year   
                                                                                   ended         ended         ended   
                                                                               31 Dec 18     31 Dec 17     30 Jun 18   
                                                                                  R' 000        R' 000        R' 000   

Sales                                                                          1 598 129     1 715 259     3 714 238   

Operating costs excluding depreciation and amortisation of                                                             
non-financial assets                                                         (1 802 238)   (1 629 398)   (3 530 690)   

Operating (loss)/profit before depreciation and amortisation of                                                        
non-financial assets                                                           (204 109)        85 861       183 548   
Depreciation and amortisation of non-financial assets                           (10 951)      (10 425)      (20 076)   
(Loss)/profit from operations                                                  (215 060)        75 436       163 472   
Finance income                                                                     6 347        10 383        19 765   
Finance expenses                                                                 (9 531)       (6 161)      (12 310)   
(Loss)/profit before income tax                                                (218 244)        79 658       170 927   
Income tax expense                                                              (53 223)      (27 670)      (59 662)   
(Loss)/profit for the period                                                   (271 467)        51 988       111 265   

Other comprehensive income                                                           328       (8 734)       (1 673)   
Items that will not be reclassified to profit or loss                                                                  
Non-controlling interests in foreign currency translation adjustments                 94       (1 353)           113   
Pension fund employer surplus account remeasurements                             (1 500)         (923)       (3 733)   
Aeroplane revaluation surplus increase                                               678           161           173   
Income tax effect of items that will not be reclassified to profit or loss           234           371           941   
Items that may be reclassified subsequently to profit or loss                                                          
Foreign currency translation reserve adjustments attributable                                                          
to ordinary shareholders of the Company                                              794       (7 888)         1 149   
Income tax effect of adjustments                                                      28           898         (316)   
Total comprehensive income for the period                                      (271 139)        43 254       109 592   
(Loss)/profit for the period attributable to:                                                                          
Ordinary shareholders of the Company                                           (231 034)        45 089        96 821   
Non-controlling interests                                                       (40 433)         6 899        14 444   
                                                                               (271 467)        51 988       111 265   
Total comprehensive income attributable to:                                                                            
Ordinary shareholders of the Company                                           (230 878)        37 533        95 073   
Non-controlling interests                                                       (40 261)         5 721        14 519   
                                                                               (271 139)        43 254       109 592  
                                                                                
Earnings per share (cents)                                                                                             
Basic earnings per share                                                         (814,4)         159,5         343,9   
Diluted basic earnings per share                                                 (814,0)         159,4         343,8   
Headline earnings per share                                                      (817,0)         157,6         341,0   
Diluted headline earnings per share                                              (816,6)         157,6         340,9   
 

GROUP STATEMENT OF CHANGES IN EQUITY

                                                                               Unaudited     Unaudited       Audited   
                                                                              Six months    Six months          Year   
                                                                                   ended         ended         ended   
                                                                               31 Dec 18     31 Dec 17     30 Jun 18   
                                                                                  R' 000        R' 000        R' 000  
                                                                                   
Opening balance                                                                  878 466       802 229       802 229   
Effect of IFRS 15 adoption                                                     (332 670)             -             -   

Opening balance (restated)                                                       545 796       802 229       802 229 
  
Total comprehensive income for the period                                      (271 139)        43 254       109 592   
(Loss)/profit for the period                                                   (271 467)        51 988       111 265   
Other comprehensive income                                                           328       (8 734)       (1 673)   
Total contributions by and (distributions to) owners                            (13 835)      (18 691)      (33 355)
   
Ordinary dividends paid                                                         (14 690)      (14 296)      (23 493)   
Distributions to non-controlling interests                                             -             -         (820)   
Ordinary shares repurchased and cancelled                                                            -         (301)   
Equity-settled share options expense                                                   -             -         1 171   
Ordinary shares acquired and held as treasury shares                                   -       (6 321)      (28 371)   
Treasury shares paid up and released to participants                                 855         1 926        18 459 
  
Changes in ownership interests in subsidiaries                                                                         
Acquisition of non-controlling interests                                           (223)             -             -   
Closing balance                                                                  260 599       826 792       878 466 
  
Comprising:                                                                                                            
Issued capital                                                                   109 178       109 479       109 178   
Treasury shares                                                                 (74 531)      (51 115)      (74 587)   
Reserves                                                                          64 691        60 206        64 152   
Retained earnings                                                                153 405       618 110       681 422   
Equity attributable to ordinary shareholders of the Company                      252 743       736 680       780 165   
Non-controlling interests                                                          7 856        90 112        98 301   

Total equity                                                                     260 599       826 792       878 466   


GROUP STATEMENT OF CASH FLOWS

                                                                               Unaudited     Unaudited       Audited   
                                                                              Six months    Six months          Year   
                                                                                   ended         ended         ended   
                                                                               31 Dec 18     31 Dec 17     30 Jun 18   
                                                                                  R' 000        R' 000        R' 000  
                                                                                   
Net cash flows from operating activities                                       (108 446)      (48 274)      (69 922)   

Cash (utilised by)/generated from operations                                   (204 109)        90 380       184 350   
Net working capital movements                                                    136 489     (116 444)     (206 583)   
Net finance (expense)/income                                                     (3 184)         4 222         7 455   
Taxation paid                                                                   (22 952)      (12 136)      (30 831)   
Dividends and distributions paid                                                (14 690)      (14 296)      (24 313)
   
Net cash flows from investing activities                                        (10 948)      (11 511)      (32 224) 
  
Purchase of property, plant and equipment                                       (13 242)      (13 806)      (32 505)   
Purchase of additional interest in joint operation                                     -             -       (3 393)   
Proceeds from the sale of plant and equipment                                      2 294         2 295         3 674 
  
Net cash flows from financing activities                                           1 496       (4 618)      (15 264)
   
Net extention/(repayment) of interest-bearing borrowings                             864         (223)       (5 051)   
Acquisition of non-controlling interests                                           (223)             -             -   
Ordinary shares repurchased and cancelled                                              -             -         (301)   
Ordinary shares acquired and held as treasury shares                                   -       (6 321)      (28 371)   
Treasury shares paid up and released to participants                                 855         1 926        18 459 
  
Decrease in cash and cash equivalents                                          (117 898)      (64 403)     (117 410)
   
Cash and cash equivalents at the beginning of the year                           318 129       437 118       437 118   
Effect of exchange rate movements on cash balances                               (6 661)       (9 600)       (1 579)   
Cash and cash equivalents at the end of the period                               193 570       363 115       318 129   


SEGMENT INFORMATION

                                                                                                       Consolidation   
                                                                   Engineering                                   and   
                                               Total   Equipment      Services   Australia   Central     elimination   
                                              R' 000      R' 000        R' 000      R' 000    R' 000          R' 000   
Unaudited                                                                                                              
Six months ended 31 December 2018                                                                                      
Sales                                                                                                                  
External sales                             1 598 129     462 999       847 885     287 218        27               -   
Inter-segment sales                                -         196             -           -     9 771         (9 967)   
Total sales                                1 598 129     463 195       847 885     287 218     9 798         (9 967)   

(Loss)/profit before income tax            (218 244)      35 894     (265 461)      14 628   (3 947)             642   
Assets                                     1 780 168   1 025 214       390 637     470 479    97 487       (203 649)   
Liabilities                                1 519 569     533 466       910 596     230 921    28 977       (184 391)   


Unaudited                                                                                                              
Six months ended 31 December 2017                                                                                      
Sales                                                                                                                  
External sales                             1 715 259     485 140       974 245     255 841        33               -   
Inter-segment sales                                -         762             -           -    12 266        (13 028)   
Total sales                                1 715 259     485 902       974 245     255 841    12 299        (13 028)   

Profit/(loss) before income tax               79 658      47 430        23 829      16 367   (7 814)           (154)   
Assets                                     2 027 302     937 929       818 323     309 859   100 549       (139 358)   
Liabilities                                1 200 510     484 557       718 294     103 915    19 164       (125 420)   

Audited                                                                                                                
Year ended 30 June 2018                                                                                                
Sales                                                                                                                  
External sales                             3 714 238     970 918     2 230 270     512 970        80               -   
Inter-segment sales                                -       5 864            59           -    20 692        (26 615)   
Total sales                                3 714 238     976 782     2 230 329     512 970    20 772        (26 615)   

Profit/(loss) before income tax              170 927      87 220        51 219      37 041   (4 912)             359   
Assets                                     2 426 452     929 977     1 054 336     523 189    96 241       (177 291)   
Liabilities                                1 547 986     445 549       936 580     291 311    23 439       (148 893)   


HEADLINE EARNINGS, SHARES IN ISSUE AND PER SHARE MEASUREMENTS

                                                                               Unaudited     Unaudited       Audited   
                                                                              Six months    Six months          Year   
                                                                                   ended         ended         ended   
                                                                               31 Dec 18     31 Dec 17     30 Jun 18   
CALCULATION OF HEADLINE EARNINGS (R'000)                                                                           
    
(Loss)/profit attributable to ordinary shareholders of the Company             (231 034)        45 089        96 821   
Less: Items excluded from headline earnings                                          750           524           811   
Profit on disposal of plant and equipment                                          1 224           858         1 338   
Income tax effect on profit on disposal of plant and equipment                     (343)         (242)         (385)   
Non-controlling interests in profit on disposal of plant and equipment             (131)          (92)         (142)   
Headline earnings                                                              (231 784)        44 565        96 010 
  
WEIGHTED AVERAGE NUMBER OF ORDINARY                                                                                    
SHARES IN ISSUE ('000)                                                                                                 
Number of shares at the beginning of the year                                     32 503        32 519        32 519   
Less: Effect of treasury shares in Group entities                                                                      
at the beginning of the year                                                     (4 171)       (4 151)       (4 151)   
Basic number of shares in issue at the beginning of the year                      28 332        28 368        28 368 
  
Weighted average effect of changes during the period                                                                   
Treasury shares acquired during the period                                             -         (115)         (570)   
Treasury shares released to incentive scheme participants                             38            22           357   
Weighted average number of shares in issue                                        28 370        28 275        28 155   
Effect of outstanding share options                                                   13             7             7   
Diluted weighted average number of shares in issue                                28 383        28 282        28 162  
 
BASIC NUMBER OF SHARES IN ISSUE AT                                                                                     
THE END OF THE PERIOD ('000)                                                                                           
Ordinary shares in issue                                                          32 503        32 519        32 503   
Less: Treasury shares in issue                                                   (4 102)       (4 326)       (4 171)   
Ordinary shares in issue on which net asset value                                                                      
per ordinary share is calculated                                                  28 401        28 193        28 332 
  
PER SHARE MEASURES (CENTS)                                                                                              
Earnings per ordinary share                                                                                             
- basic                                                                           (814,4)         159,5         343,9   
- diluted                                                                         (814,0)         159,4         343,8   
Headline earnings per ordinary share                                                                                    
- basic                                                                           (817,0)         157,6         341,0   
- diluted                                                                         (816,6)         157,6         340,9   
Net asset value per ordinary share                                                    890         2 613         2 754   
Dividends declared for the period per ordinary share                                    -            32            82   


NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed group interim financial statements are prepared in accordance with International Financial
Reporting Standard IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and the requirements of the Companies Act of South Africa.

The accounting policies applied in the preparation of the condensed group interim financial statements are in
terms of International Financial Reporting Standards and are consistent with those applied in the previous
consolidated financial statements except for those new standards adopted.

CHANGE IN ACCOUNTING POLICIES
The adoption of certain new standards, which became effective in the current period, has resulted in changes to
accounting policies and disclosures, of which the adoption of IFRS 15: Revenue from Contracts with Customers
("IFRS 15") has had a material impact on the financial position of the Group.

The Group adopted IFRS 15 with effect from 1 July 2018, using the cumulative effect method. As a result, the
cumulative effect of initial application of the standard is recognised as an adjustment to equity at the beginning
of the current financial reporting period. Comparative information has not been restated, and continues to be
reported in terms of the previous applicable standards, IAS 11 and IAS 18.

Under IFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the
timing of the transfer of control at a point in time or over time requires judgement.

The following table summarises the impact of the adoption of IFRS 15 on the Group:

  Type of                   Nature, timing of satisfaction of            Nature of change in
  product/service           performance obligations,                     accounting policy
                            significant payment terms

  Construction              Revenue incorporates the original            The implementation of IFRS 15 had
                            contract value together with any             no impact on the recognition of
                            approved variations and claims to            revenue for construction contracts.
                            the extent it is highly probable they
                            will result in revenue.                     The impact of the implementation of
                                                                        IFRS 15 on onerous contracts is
                            Revenue is recognised over time by          described below.
                            measuring the progress of the contract
                            toward completion.

                            When a claim or variation is recognised,
                            the cumulative contract price is
                            revised and the measurement of
                            progress toward completion is
                            reassessed at each reporting date
                            and any increases or decreases in
                            revenue accounted for.

  Sale of goods             The Group recognises revenue when a          The implementation of IFRS 15 had no
                            customer obtains control of the goods,       impact on the recognition of revenue
                            which will be through delivery or            for the sale of goods.
                            collection.


Where the Group identifies an onerous construction contract, an onerous contract provision is required to be
recognised. IFRS 15 does not include specific guidance on the accounting for onerous contracts. As this
standard withdraws the previous accounting standard (IAS11), accounting for onerous contracts is now in terms
of IAS 37: Provisions, Contingent Liabilities and Contingent Assets ("IAS 37"). IAS 37 places a higher threshold to
be met in order for a Company to recognise the reimbursement of contract costs. As a result, reimbursements
which were previously considered to be highly probable at 30 June 2018 do not qualify for recognition under IAS
37 and therefore an accumulated debit adjustment to equity has been accounted for.


IMPACT ON THE FINANCIAL STATEMENTS

The following table summarises the impact of adopting IFRS 15:

                                                          At       Adoption              At   
                                                30 June 2018     of IFRS 15     1 July 2018   
Consolidated balance sheet (R' 000)                                                           
Assets                                                                                        
Deferred income tax assets                           108 912         29 575         138 487   
Contract work not yet billed                         667 806      (362 245)         305 561   
Equity                                                                                        
Retained earnings                                    681 422      (282 769)         398 653   
Non-controlling interests                             98 301       (49 901)          48 400   


Excluding the abovementioned adjustments, there is no other material impact from application of IFRS 9 and 
IFRS 15 for the Group on these results.

RELATED PARTY TRANSACTIONS
Group entities entered into various sale and purchase transactions with related parties in the Group in the ordinary
course of business, the nature of which was consistent with those previously reported. All transactions and
balances with these related parties have been eliminated in the consolidated results.

FAIR VALUE
The ELB Group measures foreign currency forward exchange contracts at fair value using inputs as described in
Level 2 of the fair value hierarchy. The fair values for foreign currency forward exchange contracts are based on
quotes from brokers. Similar contracts are traded in an active market and the quotes reflect the actual
transactions on similar instruments. All other financial assets or liabilities carrying values approximate their fair
values based on the nature or maturity period of the financial instrument. There were no transfers between Levels
1, 2 or 3 of the fair value hierarchy during the period.

CAPITAL EXPENDITURE INCURRED AND FUTURE CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure of R13 million (2017: R14 million) was incurred during the period on plant and equipment.
Capital expenditure of R33 million was incurred during the year ended 30 June 2018 on plant and equipment.
There were no material capital expenditure committments at each reporting date.

CONTINGENCIES
The Group operates in the engineering contracting business and is exposed to the risks associated with
engineering contracts which does from time to time include the need to resolve disputes by way of mediation,
arbitration and if need be, litigation. These risks are managed on the basis of limited liability and appropriate
insurances.

FINANCIAL PREPARATION AND INDEPENDENT AUDIT
The preparation of the condensed group interim financial statements was supervised by the group financial
director, Michael Easter CA(SA). These condensed group interim financial statements have not been reviewed or
audited by the Group's independent external auditors.

POST BALANCE EVENTS
There were no significant events arising between the end of the financial reporting period and the date of the
Group Interim Report which materially affect the financial position or results of the Group.
         
ELB GROUP LIMITED                                                     
Registered office                                                                            
14 Atlas Road, Anderbolt, Boksburg 1459                                                      
Postal address                                                                               
PO Box 565, Boksburg, 1460
                                                                   
Telephone                                                                                    
+27 11 306 0700                                                                              
Website                                                                                      
www.elb.co.za                                                                                
Email                                                                                        
admin@elb.co.za  
                                                                            
Share transfer secretaries                                                                   
Computershare Investor Services Proprietary Limited                                          
2nd Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196                               
(PO Box 61051, Marshalltown, 2107)  
                                                                                                     
Directors                                                                                    
AG Fletcher (chairman),                                                                      
Dr SJ Meijers (group chief executive and chief executive - ELB Engineering Services),        
PJ Blunden (chief executive - ELB Equipment), MC Easter (financial director), T de Bruyn*,   
Dr JP Herselman*, B Makhunga*, R Nkabinde*, MV Ramollo, CJ Smith (alternate),                
IAR Thomson*, JC van Zyl*.                                                                   
*Independent non-executive     
                                                              
Company secretary                                                                            
Elbex Proprietary Limited   

Sponsor                                                                                      
Questco Corporate Advisory Proprietary Limited                                               
1st Floor, Yellowwood House, Ballywoods Office Park                                          
33 Ballyclare Drive, Bryanston, 2191      
                                                                        
Release date                                                                                 
The unaudited group interim report was released on 5 April 2019.                             




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